May 23, 1995 CHAIRMAN HUNDT URGES MOVEMENT FROM OLD REGIME TO NEW PARADIGM FOR COMMUNICATIONS POLICY FCC Chairman Reed E. Hundt, in a speech delivered today at the Museum of Television & Radio in New York, told his audience that it is time for a major change in communications policy, moving from the old regime to a new paradigm for policy. He noted that this was difficult because, on one hand, powerful vested interests support the status quo. The old regime is marked by reduced competition and relies on "getting one's way with the much-maligned FCC by a combination of political pressure, public controversy, and private pleasantries." On the other hand, "we are under attack from a new group of headline-seeking think tanks who make war on the very notion that there is a public interest aspect to communications. Their slogan is abolish the FCC - but their meaning is this: they want to quash all claims by the public on any aspect of the communications, information and entertainment sector of our economy." Chairman Hundt named five working principles for the new policy paradigm applicable to broadcasting: (1) in order to compete in the video-in-the-home business and any ancillary business, broadcasters should use their digital spectrum for HDTV, multicasting, video, data delivery or anything else they want to do; (2) the switch from analog to digital must be swift, smooth and inexpensive; (3) consumers will be more comfortable with the switch to digital reception if the technologies they confront are transparent, manageable, competitive and accessible; (4) national and local broadcast ownership rules should be based on sound competition policy, not arbitrary limits; and (5) the FCC must set out the meaning of the public interest obligations of broadcasters in a way that's suitable for the hotly competitive digital world. This last principle includes ensuring that all, not just some, broadcasters have fair and equal public interest duties; that these duties are clear and specific; and that the duties imposed are not so burdensome that broadcasters will be unreasonably hampered in their competition with others who do not have analogous obligations. - FCC - CHAIRMAN REED E. HUNDT FEDERAL COMMUNICATIONS COMMISSION before the MUSEUM OF TELEVISION & RADIO New York, New York May 23, 1995 Thank you Bob for that kind introduction. It's great to be back at the Museum Roundtable. It's been a year. Things change. Meanwhile this Congress, like its predecessor, is debating fundamental reform of the Communications Act. It is time for major change in communications policy. This is difficult because of two countervailing forces. On the one hand, powerful vested interests support the status quo of the old regime. The old regime relies on getting one's way with the much-maligned FCC by a combination of political pressure, public controversy, and private pleasantries. The old regime is marked by reduced competition. On the other hand, we are under attack from a new group of headline seeking think tanks who make war on the very notion that there is a public interest aspect to communications. Their slogan is abolish the FCC, but their meaning is this: they want to quash all claims by the public on any aspect of the communications, information and entertainment sector of our economy. Their view is that purely private negotiations are sufficient to deal with issues of spectrum management, license allocation, rules of competition against monopolies, universal service, and the broadcasters' public interest obligations. The public, presumably, should wait outside the backroom where the deals are being done. I'm in profound disagreement with the precepts of these new groups. But I'm not crazy about the old regime either. I believe markets generally work to the best interest of everyone, if they are competitive. I don't believe bureaucrats should pick the winners in competition for licenses. I don't believe the FCC should exist in order to protect incumbents from what is euphemistically called 'too much competition.' In all these respects I differ with the old regime as much as I differ from the Johnny-come- lately think tanks. By advocating competition in all communications markets, we at the FCC are spelling out the end of the old regime of regulation. The best current example is our auctions of airwaves. In four auctions to date, we compressed the licensing process from three years to three months, earned over $9 billion for the U.S. Treasury, and jumpstarted competition that will drive $20 to $30 billion of investment in new wireless technologies. That's the biggest single investment in new technology in history. But these auctions were not the result of private negotiations in a backroom. At the FCC we used an open public record to develop a plan that assured efficient use of the valuable public property of the airwaves. And we arranged an auction that will make the wireless communications market in this country the most competitive communications market in the world. We also are taking numerous steps to make sure that the new entrants in this business have a fair chance to compete with the incumbents. Our approach to the wireless auctions epitomizes the new paradigm of communications policy. We didn't pick winners in lotteries or comparative hearings. But we also didn't stick our heads in the sand while letting current users divvy up the spectrum in private deals. Instead we defined the public interest and used market based techniques to achieve it. In broadcasting policy too we must begin to follow the new paradigm. Under the old regime, the FCC struck a kind of gentlemen's agreement with the three networks that, in return for a certain amount of protection from competition, the networks would deliver an unspecified amount of public interest content. This gentlemen's agreement could never have been written. Some say it was real; others say it was a charade. Some say it was honored in the breach. Others say it was a good bargain for the country. But whatever were its merits, this gentlemen's agreement was the essence of the old regime of broadcasting policy. And it is doomed by competition. There are simply too may competitors in the video-in-the-home market, as Bob Wright calls it, for an unstated compact between government and a handful of networks to be meaningful or sustainable. As the old regime of broadcast regulation fades away, the rules that shored up the gentlemen's agreement are struck from the books. So the Fairness Doctrine is gone and won't return. Fin Syn will be gone by the end of this year, I predict. And the next big rule to go may well be the Prime Time Access Rule. Other rules will also face the guillotine as the old regime passes. But in lieu of the old regime I'm not willing to abandon the concept that broadcasters owe the public something in return for using the public property of the airwaves. I think it would be very good for broadcasters and the country if broadcasters were to trade in their current spectrum in return for new spectrum for the purpose of digital transmission. This new spectrum and new technology will greatly bolster broadcasting's competitiveness. But the conversion to digital transmission also is the right time to define the new paradigm for broadcasting policy. Here are five working principles underlying the new paradigm. First, in order to compete in the video-in-the-home business and any ancillary business, broadcasters should use their digital spectrum for HDTV or multicasting or audio or data delivery or anything else they want to do. But broadcasters will deliver some product for free to everyone with a digital receiver. Second, the switch from analog to digital obviously threatens to divide the audience between analog and digital reception - increasing costs for broadcasters while not necessarily increasing the size of the audience. It will be best for broadcasters and consumers if the switch to digital reception is swift, smooth and inexpensive. Our policies have to focus on achieving this goal. Third, consumers will be more comfortable with the switch to digital reception if the technologies they confront are transparent, manageable, competitive and accessible. We all share the goal of consumer satisfaction. That's why I think broadcasters should be talking now with the FCC, cable, VDT and the other parties about the application of the principle of interoperability to the digital tv receiver. Fourth, national and local broadcast ownership rules should be based on sound competition policy, not arbitrary limits. The country needs rules to protect against anticompetitive concentration and to assure diversity of voice in national and local markets. Today's rules need changing, but some rules are necessary. Last, in the hotly competitive digital world, broadcasters should have public interest duties but only under these conditions: (a) all broadcasters should have equal and reasonable public interest duties; it's not fair for some broadcasters to undertake a duty to serve the public while others act differently; (b) such public interest duties should be clear and specific so that the costs of compliance can be minimized and fairness can be assured; (c) the public interest duties on broadcasters cannot be so burdensome that broadcasters will be unreasonably hampered in their competition with others who do not have analogous obligations. The new think tanks ruminating recently about communications claim that there is no need for the public interest obligation. But when we lease property, as government does with the spectrum, it make sense to put conditions in the lease that serve the interest of the leaseholder. For spectrum, the leaseholder is the public. And the conditions are the public interest obligations of broadcasters. Here are two examples: -- The delivery of children's informational and educational TV should be a condition in the broadcasters' lease. At the FCC, our current proposal for implementing the Children's TV Act admits that children's informational TV may well be unattractive as a commercial business. If it is a noncommercial duty, it should be minimal, efficiently allocated, specific, and applicable to all broadcasters. Any other approach reduces to occasional admonishments from FCC chairmen. Any other approach is a relic of the era of the gentlemen's agreement, unsustainable in the competitive world of the new paradigm. Furthermore, since carrying these shows is a burden, broadcasters should be able to trade the obligations among each other. In that way broadcasters with the greatest incentive to air the shows will take on the duty -- The second example is the pressing need for candidate access to the airwaves. At the NAB convention last month Rupert Murdoch proposed free advertising time for political campaigns on today's analog channels. More than we like to recognize, our system of participatory democracy is in jeopardy. In the 21st century, democracy will thrive only if our communications revolution makes policy and government a matter of widespread civil discourse. Democracy absolutely depends on a consensus of goodwill and a willingness to compromise among all citizens. We need the media to create that consensus. One technique for building that is consistent with what Rupert Murdoch suggested at the NAB -- a time bank contributed by broadcasters for political broadcasting. Candidates and parties could draw from the bank vouchers for ad time, and cash in those vouchers with broadcasters. This proposal will have even more power and more financial viability with the capacity and bandwidth explosion of the digital era. These are two concrete and limited ways that the time-honored, much-disparaged, infinitely valuable public interest obligation could be applied to broadcasters in the digital age. There's not much question that billions of dollars will be earned in the digital world. There's not much question that the digital revolution will improve many aspects of our country. But whether it brings us together so that our democracy can count on adding another century to its current world record for longevity -- that's what is at the core of the redefinition of the public interest. And that's what's most important about the new paradigm for broadcasting policy. - FCC -